International Monetary Fund predicts less vigorous recovery in the US, Britain and the leading eurozone countries
The International Monetary Fund has trimmed its growth forecast for the world economy in 2013 after predicting a less vigorous recovery in the US, Britain and the leading countries of the eurozone.
In an update to predictions made in last October’s World Economic Outlook, the IMF said the upturn was now expected to be more gradual than anticipated three months ago.
It said that 2013 was on course to be a better year for the global economy than 2012, but expressed concern about renewed problems in the eurozone and excessive action to cut America’s budget deficit.
“Policy actions have lowered acute crisis risks in the euro area and the United States. But in the euro area, the return to recovery after a protracted contraction is delayed.
“If crisis risks do not materialise and financial conditions continue to improve, global growth could be stronger than projected. However, downside risks remain significant, including renewed setbacks in the euro area and risks of excessive near-term fiscal consolidation in the United States. Policy action must urgently address these risks.”
The IMF said it expected the world economy to grow by 4.1% in 2013, up from 3.5% in 2012 but 0.1 points lower than forecast in October 2012.
Rich western nations will continue to struggle, according to its latest projections, with growth of 1.4% this year following expansion of 1.3% in 2012.
Instead of a 0.1% increase in the eurozone economy in 2013, the IMF is now pencilling in a decline in gross domestic product of 0.2%. Spain and Italy will both endure a second year of recession, while the two biggest countries of the single currency area – Germany and France – are expected to post growth of 0.6% and 0.3% respectively.
“The euro area continues to pose a large downside risk to the global outlook. In particular, risks of prolonged stagnation in the euro area as a whole will rise if the momentum for reform is not maintained”, the IMF said.
It cut its growth forecast for Britain by 0.1 points to 1% in 2013 and by 0.3 points to 1.9% in 2014. The US is expected to be the fastest growing of the leading western economies in 2013 at 2%.
“In the US, the priority is to avoid excessive fiscal consolidation in the short term, promptly raise the debt ceiling, and agree on a credible medium-term fiscal consolidation plan, focused on entitlement and tax reform,” the IMF said.